What ASX 200 energy shareholders should know about the Permian Basin 2022

The S&P/ASX 200 Index (ASX: XJO) has managed to claw back its 0.5% morning loss and is currently up 0.15% in afternoon trade.

The same can’t be said for ASX 200 energy shares today.

The Woodside Petroleum Ltd (ASX: WPL) share price is down 0.22% to $22.23 per share.

Santos Ltd (ASX: STO) is taking a bigger hit, with shares down 0.91% to $6.54 per share.

As for the Oil Search share price? I’d quote it if I could. But Oil Search stopped trading on the ASX on Friday, following its official merger with Santos.

Santos and Woodside are facing some modest headwinds today with crude oil prices slipping overnight. International benchmark Brent Crude is down 0.5% over the past 24 hours, trading at US$74.02 per barrel.

That’s well up from the US$51.80 per barrel Brent was fetching on 1 January. But it’s well down from the US$85.99 that same barrel was worth on 29 October.

ASX 200 energy shares slip alongside oil price

With Brent crude down 14% since 29 October, it’s no surprise that the Woodside share price is also down. Though only by 6.3% since then. Over that same time, the Santos share price has lost 8.2%.

Which brings us back to the expansion plans underway for the Permian Basin.

What’s happening at the Permian Basin?

Most ASX 200 energy shareholders will be at least passingly familiar with the Permian Basin.

Covering more than 200,000 square kilometres, spread across the US states of Texas and New Mexico, the region contains rich oil and gas deposits. With new technologies opening up profitable shale oil extraction over the past decade, the potential output from the Permian Basin has soared.

In fact, as Bloomberg notes, “Crude production from the Permian exceeds that of each OPEC member except Saudi Arabia.”

And that’s just the Permian, mind you. Not the rest of the crude oil potential housed within continental US, Alaska, and offshore.

Why does this matter for ASX 200 energy shareholders in 2022?

Word has it that US shale oil producers are planning to up their output in the Permian.

Rystad energy forecasts that shale oil producers will ramp up their capex by some 20% to US$83.4 billion next year.

According to Bloomberg, Chevron is going to increase its spend in the Permian to $3 billion in 2022. That’s 50% more than the energy giant spent this year.

And the US Energy Information Administration (EIA) forecasts that crude output from the Basin will top 5 million barrels per day (bpd) in January 2022, exceeding pre-pandemic production records.

On the more bullish outlook for ASX 200 energy shares, OPEC+ appears intent to stick to its gradual production increases. And even with the expanded forecast output from the Permian Basin, total crude production in the US in 2022 is still expected to be below its pre-pandemic levels.

The post What ASX 200 energy shareholders should know about the Permian Basin 2022 appeared first on The Motley Fool Australia.

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• $22 billion of newly merged Santos shares are fronting the ASX this morning. Here’s what you need to know
• 4 ASX shares tipped for buybacks in 2022: expert

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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